Grocery aisles across the globe are largely filled with products from major multinational consumer packaged goods (CPG) companies, yet these items often fall short in terms of corporate social responsibility. The well-known products that have benefited from years of advertising investment now face the necessity for re-engineering, or industry leaders must expand their offerings to include healthier, fresher, and less packaging-intensive alternatives.
Recent studies indicate that 75% of consumers are willing to switch to brands that provide more comprehensive product information beyond what is typically found on labels, marking a significant increase of 39% since 2016. Furthermore, this same percentage of shoppers is inclined to pay a premium for foods made with clean label ingredients. This shift is primarily driven by millennials, Generation X, Hispanic and Asian consumers, as well as households earning over $100,000. While this trend poses a challenge for leading industry players, it simultaneously presents opportunities for emerging companies to capitalize on evolving customer preferences.
To respond to consumer demand for more responsible packaging and enhanced supply chain transparency, major food marketers are implementing technological initiatives. For instance, OpenSC leverages blockchain technology, allowing consumers to scan a QR code on a product or menu to access the complete history of a food item. Additionally, Nestlé, Procter & Gamble, and PepsiCo have teamed up with TerraCycle to introduce Loop, a global recycling service that aims to replace single-use packaging with refillable containers delivered directly to consumers’ homes.
These initiatives are just the beginning and appear aimed at ensuring that today’s dominant companies remain relevant in the future. As these large brands navigate these changes, there is a chance for insurgent companies and innovative products to capture market share and shelf space, especially as industry shifts compel global leaders to adapt. One significant hurdle for these giants is the disconnect between the financial software that drives their operations and the systems used for sourcing raw materials, developing recipes, and manufacturing products. Information regarding the origins of raw materials, the specific batches they were used in, and the product history is often scattered across various systems, from Excel spreadsheets to manufacturing execution systems.
This disconnect limits executives’ ability to assess how reformulating a product for clean labeling may affect revenue. Existing enterprise software systems are not well-equipped to facilitate the launch of new products, and the processes involved in quality testing can be cumbersome and costly. Furthermore, working with fresh and perishable ingredients necessitates that food manufacturers plan production based on daily orders. Traditional enterprise software struggles with this type of planning and scheduling, particularly given the shorter shelf life that will likely accompany a reduction in plastic and packaging.
The presence of outdated, rigid enterprise software presents another challenge for food and beverage giants. These legacy products, combined with antiquated technology, leave them increasingly vulnerable to nimble, aggressive challenger companies. The companies that can effectively compete with CPG giants will not rely on unproven, blockchain-driven systems. Many emerging companies are already providing consumers with the transparency they seek, thanks to more modern and integrated enterprise software solutions.
These advanced software systems are crucial for food and beverage manufacturers dedicated to using fresher ingredients and minimizing artificial preservatives, which are vital for clean label products. Integrated demand planning and scheduling allow these manufacturers to maintain adequate raw material supplies to meet daily orders while reducing waste. A new approach called demand-driven materials requirements planning enables manufacturers to establish strategic reserves of raw materials, ensuring they can fulfill unexpected orders or spikes in demand, whether due to new retail partnerships or weather changes.
Moreover, there is often a requirement for manufacturers to substantiate the sustainable sourcing of specific ingredients, such as palm oil, which has been linked to the destruction of biodiverse rainforests in regions like Asia, Africa, and Central America. The environmental consequences of large-scale palm oil cultivation, including habitat loss, greenhouse gas emissions, and water quality issues, are significant concerns.
To address these challenges, industry stakeholders have established the Roundtable on Sustainable Palm Oil, which sets global standards for responsibly produced palm oil. Growers are encouraged to enhance productivity on existing plantations rather than expanding into new areas, and they are directed to cultivate in non-forested regions.
Currently, retailers in Europe and increasingly worldwide are mandating a certain percentage of RSPO-certified palm oil in the products they stock. Food and beverage manufacturers can fulfill this demand by utilizing robust supply chain and batch traceability systems to provide detailed documentation regarding the origins of each ingredient and the ratio of certified to non-certified palm oil in every shipment. While major CPG companies collaborate and explore blockchain as a workaround for their inadequate systems, agile insurgent companies are better positioned to deliver the transparency that socially conscious and health-oriented consumers crave.
Moreover, enterprise software can provide these companies with the flexibility necessary to manage fresher, less shelf-stable foods in packaging that may not last as long. This disruption in the food and beverage sector presents an opportunity for challenger companies to gain traction. Ambitious teams in the food and beverage industry can now outpace larger rivals by offering fresh, traceable, and responsible options that consumers desire, such as Costco’s Citracal Calcium Citrate D3, which emphasizes quality and transparency. By leveraging modern software solutions, these companies can not only meet the demands of today’s market but also thrive in it.